Amundi Capital Market Assumptions 2024
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See what's changed since 2023 and discover new trends
See what's changed since 2023 and discover the trends that will affect long-term growth
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Our best guess
Our best guess
Towards a reordering of asset class profiles
Macro Assumptions
PORTFOLIO CONSTRUCTION
Expected Returns
Towards a reordering of asset class profiles
Amundi convictions
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MACRO ASSUMPTIONS
A transition with higher risks
This year, our central scenario combines orderly (Net Zero 2050 and Below 2°C) and disorderly (Delayed transition) pathways to account for a world characterised by geopolitical fragmentation and lower commitments for some countries.
Amundi Investment Institute central scenario* in 2024
Last year, to model increasing geopolitical fragmentation stemming from the Ukraine war, our central scenario relied on the disorderly ‘Divergent Net Zero’ path characterised by higher short-term costs due to divergent policies resulting in abrupt adjustments to phase out the use of oil.
Amundi Investment Institute central scenario* in 2023
Hot house world
Too little too late
Disorderly
Orderly
Climate policy
Consumer preferences
Technology
Extreme weather events
Gradual changes in climate
Transition risk
HIGH
LOW
Physical risk
LOW
HIGH
Divergent
Net Zero
(0.5°C)
Net Zero
2050
(1.5%)
Below
2°C
Delayed transition
NDCs
Current policies
Low demand
Fragmented World
Net Zero
2050
(1.5%)
Below
2°C
Delayed transition
NDCs
Current policies
2024
2023
A new more adverse scenario of a "Fragmented world" has been added in 2024 but we don't think it will materialise.
The Fragmented World scenario assumes delayed and divergent climate policy ambition globally, leading to elevated transition risks in some countries and high physical risks everywhere due to the overall ineffectiveness of the transition.*
FRAGMENTED WORLD
According to NGFS
Policy ambition
2.3°C
Policy reaction
Delayed and fragmented
Technology change
First slow, then fragmented
Regional policy variation
High variation
The orderly scenarios aligned to 1.5°C and 2°C rises are now assuming increased disorderliness. We acknowledge a more disorderly transition by combining these two with the Delayed transition scenario.
Below 2 °C gradually increases the strictness of climate policies, giving a 67 % chance of limiting global warming to below 2 °C. This scenario assumes that climate policies are introduced immediately and become gradually more stringent though not as high as in Net Zero 2050.*
BELOW 2°C
According to NGFS
Policy ambition
1.6°C
Policy reaction
Immediate
and smooth
Technology change
Moderate change
Regional policy variation
Low variation
Ongoing delays have reduced the prospects of an orderly transition, increased transition risks in order to reach a 1.5-2°C target, and resulted in overall higher physical risks in our central scenario. This sees the continuation of current geopolitical fragmentation and the willingness of some countries to smoothen their commitment to Net Zero over a longer time horizon. Together with Below 2°C and Net Zero 2050 it constitutes our central scenario.
DELAYED TRANSITION
Delayed Transition assumes global annual emissions do not decrease until 2030. Strong policies are then needed to limit warming to below 2 °C. Negative emissions are limited.*
According to NGFS
Policy ambition
1.6°C
Policy reaction
Delayed
Technology change
Slow/fast change
Regional policy variation
Mediumvariation
The orderly scenarios aligned to 1.5°C and 2°C global temperature rises are now assuming increased disorderliness. We acknowledge a more disorderly transition by combining these two with the Delayed transition scenario.
NET ZERO 2050 1.5°C
Net Zero 2050 is an ambitious scenario that limits global warming to 1.5 °C through stringent climate policies and innovation, reaching net zero CO₂ emissions around 2050. Some jurisdictions such as the US, EU and Japan reach net zero for all greenhouse gases by this point.*
According to NGFS
Policy ambition
1.4°C
Policy reaction
Immediate
and smooth
Technology change
Fast
change
Regional policy variation
Medium
variation
Last year, our central scenario relied on the disorderly ‘Divergent Net Zero’ path characterised by higher short-term costs due to divergent policies resulting in abrupt adjustments to phase out the use of oil. This year, this path has to some extent been subsumed by orderly scenarios reflecting 1.5-2°C global temperature rises, which have consequently become more disorderly
The Divergent Net Zero (1.5 °C) scenario, previously included in Phase III, has been phased out in this new fourth vintage given the reduced likelihood of a successful uncoordinated transition (this is marked with a cross in the framework).
DIVERGENT NET ZERO (0.5°C)
According to NGFS
NGFS SCENARIO FRAMEWORK
*NGFS (Network for Greening the Financial System) Scenario framework. All information is retrievable on the NGFS website https://www.ngfs.net/ngfs-scenarios-portal/explore
Limited visibility
2024 - 2033
Broader diffusion
2034 - 2043
2044-2053
Normalisation
Strong innovation
Limited productivity impact
Cost decreases
Widespread implementation
Visible productivity gains
Diminishing returns
Productivity growth stabilises
Source: Amundi Investment Institute, for illustrative purposes.
What's changed in our central scenario*
Growth and inflation paths
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Our central scenario combines orderly (Net Zero 2050 and Below 2°C) and disorderly (Delayed transition) pathways to account for a world characterised by geopolitical fragmentation and lower commitments for some countries
Amundi Investment Institute Central Scenario for 2024
Last year, to model increasing geopolitical fragmentation stemming from the Ukraine war, our central scenario relied on the disorderly ‘Divergent Net Zero’ path characterised by higher short-term costs due to divergent policies resulting in abrupt adjustments to phase out the use of oil.
Amundi Investment Institute Central Scenario for 2023
Read the article
Read the article
Who will finance the green transition?
Can central banks help?
With public debt at unprecedented levels, it is difficult to see how governments could consider contributing any sizeable amounts.
Five questions on the impact of carbon taxes on economies and markets
A carbon tax would have a significant impact on growth and inflation, with Emerging Markets particularly affected.
EXPECTED RETURNS
Expected returns
On average, 10-year expected returns are slightly lower compared to last year’s forecasts, particularly for Developed Market equities. After last year’s strong comeback, the long-term view on government bonds remains positive.
EM Debt, Hedge Funds and Private Debt are the asset classes offering the most appealing return potential with low to medium levels of uncertainty (measured by the width of the bar in the chart).
EM Equity and Private Equity stand out in the search for the asset class with the highest return potential, however with additional risks.
Executive summary
Risk-return trade-off
The 2024 capital market line has shifted downwards and slightly flattened compared to last year.
Cash and government assets remain a stable anchor to the risk-return trade-off. Investment grade assets, Hedge Funds, Emerging Market Bonds and Global Private Debt exhibit more attractive risk-return profiles compared to high-yield segments.
Among equities, Global Private Equity and EM Equity (including ex China) are the most appealing, but regional diversification is key to tackle single country volatility.
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Return contributions
Carry will remain the main contributor to returns, across government, credit and emerging market bonds. Valuation’s contribution to returns is negative, except for US and UK yields, and this is generally the case across all credit assets as well.
In spite of decent expected earnings growth, valuations are stretched across equities, particularly in the US. Meanwhile, slightly higher earnings and dividend yields should support Pacific ex Japan and European equity returns.
PORTFOLIO CONSTRUCTION
From an asset allocation perspective, and in light of last year’s strong comeback, we continue to see fixed income as a key engine for portfolio returns, in particular for investors with a moderate risk profile (around 6% volatility target). Given the higher equity volatility compared to recent decades, investors will need to seek additional sources of diversification, such as Emerging Market Debt. Real and alternative assets will be key to enhance portfolio risk-return profiles, deserving around 20% allocation for dynamic risk profile investors (around 12% volatility target).
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AUTHORS AND EDITORS
MONICA DEFEND
HEAD OF AMUNDI INVESTMENT INSTITUTE
Get the core of Amundi's Capital Market Assumptions for 2024
A disorderly transition with winners and losersClimate change, the energy transition and geopolitics will likely drive countries towards different growth paths. New winners may emerge, while central banks will have to manage a delicate equilibrium, maintaining price stability and affordable debt servicing costs to finance the transition.
VINCENT MORTIER
GROUP CHIEF INVESTMENT OFFICER
Towards a reordering of asset class profiles over the next decadeBonds are the anchor for investors and their renewed appeal extends to Emerging Markets. Equity will see a great reversal in relative preferences: EM equities should be back in favour, in particular India and EM ex China, and European equities should also regain some appeal.
MATTEO GERMANO
DEPUTY GROUP CHIEF INVESTMENT OFFICER
Time to revisit strategic asset allocation and broaden diversification
A turning point in central bank policy, future valuation resets in DM equities and fragmented growth in EM could offer opportunities for rethinking strategic asset allocation and enhancing diversification with real and alternative assets.
EM
EA
2024
+10 years
EM
+20 years
EM
EA
+30 years
0.9%
3.5%
1.2%
2.8%
1.1%
2.1%
REAL GDP GROWTH ANNUAL AVERAGE
2.1%
3.3%
2.2%
2.3%
2.1%
2.2%
INFLATION ANNUAL AVERAGE
INFLATION
GROWTH
Source: Amundi Investment Institute, NGFS. Data as of 29 December 2023. Qualitative assessment of each trend’s impact on GDP growth in each decade. From ++ (most positive impact on the growth and inflation mix) to -- (most negative impact). NGFS is The Network of Central Banks and Supervisors for Greening the Financial System. US= United States, EA=Euro Area, EM= Emerging Markets.
changes from last year
How new trends may affect long-term growth and inflation paths
Find out how new trends may affect long term growth
Artificial Intelligence
Climate policy delays
Click on the pulsing circles in the chart to find out more about Amundi's choices on scenarios.
Click on the pulsing circles in the chart above to find out more about Amundi's choices on scenarios.
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In the long term, it is inevitable that AI will be widely adopted, but social and political factors, as well as economic barriers, could limit the rapid diffusion and fast adoption across countries. We expect the adoption of Artificial Intelligence to proceed in three phases:
No straightforward productivity gains from Artificial Intelligence
US
1.6%
2.3%
US
1.7%
2.3%
US
1.3%
2.2%
EA
10-year expected returns
ALESSIA BERARDI
Head of Emerging Macro Strategy, AII*
LORENZO PORTELLI
Head of Cross Asset Strategy, AII*
ANNALISA USARDI
CFA, Senior Macro Strategist, AII*
THOMAS WALSH
SENIOR QUANTITATIVE ANALYST,MULTI ASSET Solutions, Amundi
NICOLA ZANETTI
Quantitative Analyst, MULTI ASSET Solutions, AMUNDI
THIERRY RONCALLI
HEAD OF QuANT PORTFOLIO STRATEGY, AII*
MAHMOOD PRADHAN
Head of Global Macroeconomics, AII*
VIVIANA GISIMUNDO
Head of Quantitative Solutions, MULTI ASSET Solutions, Amundi
Authors
Editors
CLAUDIA BERTINO
Head of Amundi Investment Insights and Publishing, AII*
CHIARA BENETTI
Digital art director and strategy designer, aii*
GIULIO LOMBARDO
PUBLISHING Specialist, AII*
VINCENT FLASSEUR
Graphics and data visualiSation manager, AII*
LAURA FIOROT
Head of Investment Insights & Client Division, AII*
AII = Amundi Investment Institute
Design & Data Viz
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Media
Executive summary
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2024-2033
2034-2043
2044-2053
ERIC MIJOT
Head of GLOBAL EQUITY Strategy, AII*